This piece of mine was published on The Indian Republic on 1st October, 2014 over here.

Subsidies galore

It has been raining subsidies in the solar energy space, not only in India but globally. It is estimated that the US Federal government spent approximately $81 billion (inflation-adjusted) between 1950 and 2010 on assistance to the renewables space that consists of the solar, wind and geo-thermal energy sectors[1]. Following in its footsteps, the Indian government approved spending of Rs 4337 crores between 2010 and 2013 under the first phase of the Jawaharlal Nehru National Solar Mission- mostly in the form of incentives to solar power producers[2].

In India, solar power producers receive government assistance in a variety of ways e.g. generation based incentives (GBI) that entail a higher price per unit of energy supplied to the grid, viability-gap funding (VGF) that entails a government grant of up to 30% of the cost of setting up the plant. But, the most interesting form of government assistance consists of what is known as “accelerated depreciation” (AD). This provision allows the power producer to write-off 80% of the cost of setting up the plant in the very first year of operation. This allows the power plant-owner to save a significant amount of tax if he has other departments in the same company generating profits. However, this provision is useful only to companies that generate large profits from other businesses and thus is of little use to pure play -solar energy companies.

Solar power is simply not economically viable today. The notional cost of producing one kilowatt-hour of solar energy is about Rs 6.5 (based on the lowest bid received) as of today and it therefore makes no sense for a power producer to produce solar energy at this price and sell it to the grid at a price that averages about Rs 5.5 (e.g. Rs 5.71 in Delhi).[3] Therefore, if the government wants more solar energy to be produced in the country, subsidies are a must.

Subsidies are controversial as it is. But, when an industry that competes directly with thermal power industry is subsidized, the debate heats up further. The question is – Should the government continue subsidizing solar power?

The case for subsidies to power the solar industry

Solar power is clean energy: In the era of global warming, solar power scores over thermal power as it is environmentally clean and could play a large role in reducing the world’s green-house emissions. Data from the UN’s Intergovernmental Panel on Climate Change (IPCC) shows that a solar power plant produces only about 4.5% of the greenhouse emissions per unit of electricity produces as a coal powered thermal power plant and about 9.8% as much as a natural gas powered power plant[4]. Therefore, solar power could hold a key to drastic cuts in greenhouse emissions in the medium-long term.

Unsubsidized solar power is expected to become commercially viable in this decade itself: Another important point in favour of subsidies to the solar industry is that the solar power is getting much cheaper over time and therefore, government subsidies need not be continued for long. A US Department of Energy report observed that the median price of solar power from commercial and residential systems fell by 80% from 2008 to 2012.[5] The cost of producing solar power in India fell by a whopping 61% over the last three years.[6]

With the price of solar power falling sharply and the cost of power from conventional sources rising, unsubsidized solar power is expected to achieve grid-parity (same cost of production as the price paid by the grid) and become commercially viable in this decade itself, with some analysts estimating grid parity to be achieved by 2017. In fact, it is already theoretically profitable to produce (unsubsidized) solar power and supply it directly to commercial establishments in some part of India such as Maharashtra where the utilities charge as much as Rs 10.91 per kwHr [7][8].

The (misplaced?) case against subsidies to the solar industry

Opponents of subsidies to the solar industry argue that the idea of subsidizing an inefficient and expensive energy source goes against the very grain of capitalism and economics. They argue that if the cost of conventional energy is really rising and if solar energy is really the way of the future, then solar power plants will mushroom when the cost of generating conventional energy becomes prohibitively high, thus making solar power economically viable.

The problem with this argument is that it does not take into account the time lag of about a decade at the very least that needs to go into research and development required to produce cheap solar panels and equipment necessary to build solar plants. Therefore, if governments did not start supporting the solar industry before it became economically viable; there would be a drastic energy-shock that would threaten to derail the global economy once the prices of crude oil and coal rise above a threshold level. Therefore, subsidies to the solar industry are essentially helping smoothen out the supply shocks that would become inevitable with rising crude and coal prices.

The bottom line

Viewed in isolation, the central government’s solar power subsidy number of Rs 4337 crore sounds huge, but India is slated to rack up a total subsidy bill of about Rs 2, 46,397 crores in 2014-15[9] itself i.e. 56.8 times the subsidy that was given to the solar industry over a 3 year period. In other words, at 0.59% of the annual subsidy bill, the annual subsidy given to the solar industry is a miniscule amount. Besides, subsidy given to the solar industry is spent on productive assets that pay-off over the long run while subsidies on food and fuel do not improve productivity in any significant way.

The economic cost of global warming is something that nations in general and India in particular simply cannot afford to ignore in the medium-long term (think flash floods, missing monsoons and submerged cities). Subsidies to the solar space are a very small price to pay to help avert long-term disaster and will not be needed in a few years anyway. While this surely isn’t laissez-faire capitalism, it sure is sensible capitalism.

Ashwini Anand, CFA is an investment professional and Founding Member of Citizens for Accountable Governance and can be reached on Ash dot Pillutla at gmail dot com

The Indian Republic’s Chief Editor Akhil Handa and the Editor-at-large Ashwini Anand caught up with Dr Arvind Virmani over coffee at the Delhi Gymkhana Club in what turned out to be a very candid and revealing conversation. Dr Virmani who has served as India’s representative to the International Monetary Fund and as the Chief Economic Advisor to the Government of India talks about a variety of policy issues, lack of public policy experts, what ails the policy reform in India and the all-so-powerful vested interests. In Dr Virmani’s assessment, the Modi government has done the right things and is making the right noises but needs to maintain the momentum over the next 2 years to see India back to 8%+ growth.

Experience with the government and public policy

TIR: Dr Virmani, you have been India’s representative to the International Monetary Fund, served as the Chief Economic Advisor to the Government of India, taught at top-tier universities and served on over 60 different committees, working groups and expert groups. What is your sense on the state of public policy in India?

Dr Virmani: There is a shortage of experts on policy issues. We have people with operational experience and we have academics. What we need are experts with a thorough understanding of operational issues. It is at the policy stage that the gap is most felt. This is the gap I have been trying throughout my career. In fact, I started a think-tank called Chintan to help create an impact on the policy discourse in India.

TIR: You have served the nation at the highest levels for over 30 years, something that is very rare. What has been your biggest challenge?

Dr Virmani: Bringing about systemic change is a mammoth task and is a huge challenge. It is not as simple as people often think it is. There are various vested interests with different objectives. Therefore, one has to be prepared to counter their arguments, for decision makers to approve new policies and economic reforms. For example, if a new policy proposal is put forward, you might have a bureaucrat saying, “All this sounds good, but what about so and so case? How will we deal with that?” And that is the end of the proposal. Since I spent so long in the space and made sure that I had a thorough understanding of the operational details, I was able to address all the edge-cases in my proposals and ensure that there were no loose-ends.

TIR: What do you see as the role of the bureaucracy in the functioning of the government?

Dr Virmani: The upper bureaucracy is very powerful in The Central Govt. Some of them are quite smart and knowledgable, particularly about obscure details. The good ones also understand the laws and processes. They need to be balanced with those with specialist knowledge and data based analysis.

There is also a huge lower bureaucracy (babus) at the State & local level whose power is derived from ability to obstruct economic activity.

India’s economy

TIR: Expectations have been sky-high ever since Mr Modi took office. How would you rate his term so far?

Dr Virmani: I think they have done well so far. It has only been a short while since the new government took office and the focus has been on breaking the government gridlock and improving governance and delivery. It is not easy to change the way the system functions in a sustainable way and that will remain a challenge. They seem to be doing fine so far.

TIR: What single big-ticket reform, if pursued, would change the course of the economy?

Dr Virmani: I don’t think there is one single reform that can change the course of the economy. It is not as simple as saying that item X or item Y will transform the economy overnight. However one generic problem is the jungle of laws, rules, regulations and controls built during the Socialist period from 1950 to 1980. Cutting this jungle to size can benefit every part of the economy& society.

Monetary policy

TIR: Dr Raghuram Rajan has taken a hawkish stance by raising rates thrice since he took office despite lackluster GDP growth. Would you broadly agree that containing inflation should be a higher priority at this stage than reviving growth?

Dr. Virmani: Restoration of non-inflationary growth requires a “Macro Pivot”, a tightening of fiscal policy and a loosening of monetary, as I have been saying for many years.

TIR: Surjit Bhalla, has in a recent article in the Indian Express, seemed to suggest that inflation is influenced more by trailing MSPs than by RBI’s monetary policy actions. Would you agree?

Dr Virmani: His research confirms what several of us have been saying for several years, that mis-management of cereal procurement policy & excessive stock build up has played a significant role in agricultural inflation.

TIR: Paul Volker and Alan Greenspan, in a sense represent opposite ends of the spectrum. At one point of time when Volker was the Fed Chief, interest rates stood at 18%. Greenspan and to a large extent, his successor Ben Bernanke, kept interest rates at or very close to 0 for extended periods of time. At what levels do you think developed economies should keep interest rates? Obviously, there will be variations depending on business cycles, but a rough long term target in your view would be…?

Dr virmani: On the IMF board I was the first ED to warn about the negative effect of sharp expenditure cuts in Europe, and the likely emergence of a “lost decade” of growth a la Japan. I had urged a greater write off of private debt and emphasis on structural reforms to reduce fiscal deficits over medium-long term & QE by the ECB.

Future of the Indian economy

TIR: Where do you see the Indian economy 5 years down the line, in terms of growth, inflation and overall health?

Dr Virmani: if the Modi govt keeps its focus in next two years, on revival of investment & growth, the economy can be put back on a trend growth of 8% per annum.

TIR:. Which industries are you most optimistic about in the coming 5 years?

Dr Virmani: I leave stock market predictions to those whose business it is.

Dr Virmani’s future plans

TIR: What are you upcoming plans? You told us about your think-tank, Chintan. Do you plan to focus exclusively on this initiative or do you also have other plans?

Dr Virmani: My objective is to use all media (newspapers, TV, Internet, social media) to reach those potentially interested in public policy & to convey a sense of what good policies (economic. Foreign, security) are. I am always open to new learning and trying new things.

TIR: Would you be open to considering lending your expertise to the new government?

Dr Virmani: I am very happy that the NDA Govt has taken several issues that I have researched, written and talked about, some for decades(eg governance). Other examples are sanitation (Swach Bharat), e-edu & e-health, E-gov & UID. However, I don’t think anyone in govt is looking for my particular blend of experience & knowledge.

In the earlier article in this two part series, I touched upon the fact that India’s micro, small and medium enterprises (MSMEs) are not performing up to their potential, in large part due to a stifling legal and regulatory environment and poor access to capital. I rued the fact that the government is not an enabler of business activity, but in fact, an impediment to it. In this article, let us examine the ways in which policy makers can change all this and enable our entrepreneurs to generate wealth, jobs and economic value.

Cut out the red tape

Regulatory reforms

Reformation of the system around regulation and compliance: As I mentioned earlier, the government makes companies jump through hoops to register companies and get the necessary approvals to start operations.As a result, only about 1.6 million out of the ~48.8 million MSMEs in India are formally registered and lose out on access to capital (e.g. bank loans, tax benefits), technology and growth opportunities (Sources: Zinnov, Abdul Naser et al). In fact, a study by the Imperial College Business School found that for every 1 registered business in India, there are 127 unregistered businesses. As a consequence, the government loses out of a tremendous amount of tax revenue. A great way to encourage small businesses to register themselves with the government and join the economic mainstream is to reform the system to make company registration and obtaining approvals simple, quick and automatic. Concrete steps in this direction could include:

Computerization and automation of the processing of routine procedures like the name registration of companies, tax registration (obtaining PAN numbers, TAN numbers etc.), labour registration etc. At present, there is a lot of human intervention in these procedures, thus slowing down the process substantially and forcing businesses to incur “incidental expenses” at government offices on a regular basis.

Exemption of MSMEs below a certain size from stifling regulatory requirements: How much sense does it make for a software startup employing 2 people in an apartment or a “pan-shop” employing 2 people to pay a Chartered Accountant 50,000 Rupees every year to file annual returns and audited accounts? How many small businesses actually comply with these regulations and how much tax revenue is lost due to the resulting non-compliance?

Singapore has a novel way of dealing with this problem. All businesses with revenues less than $ 5million are exempt from filing audited accounts and from complying with several regulations. This greatly simplifies regulatory compliance and results in a win-win situation for businesses and the government. Don’t you think it is high time for India to consider such a system?

Bringing unregistered businesses into the mainstream economy

A massive drive to register unregistered businesses: Remember the Voluntary Disclosure of Income Scheme (VDIS)? In 1997, this scheme gave tax-defaulters the opportunity to pay taxes on undeclared income and therefore convert “black money” into “white money” and avoid the risk of future prosecution. According to the (then) Finance Minister, the scheme yielded Rs 10,050 crores (~ US$ 2 billion) in tax revenue –a phenomenal amount of money in 1997.

While the non-registration of a business is not a serious crime, if there were a scheme to allow unregistered businesses to register in a “fast-tracked” manner and comply with simplified regulations, it would not only give these businesses better access to capital (bank loans/ tax benefits/government grants etc.) and growth opportunities but also bring in a tremendous amount of tax revenue for the government in the long run. The key is to give business owners the feeling that it makes business sense to comply with regulations and to give them the confidence that they will not be harassed by government officials.

Tax reforms

A business-unfriendly taxation regime hinders economic activity, hurts job creation and stymies wealth generation. Ironically, a business-unfriendly regime also results in lower tax revenue (due to non-compliance). The following steps are likely to give an impetus to MSMEs and maximize tax revenues for the government in the long-run.

Abolishing of the “startup tax”: One of the worst legacies of the UPA II government is what is colloquially referred to as the “startup tax”. Introduced by the same Finance Minister who introduced “GAAR” and retrospective taxation, “startup tax” refers to the tax that startups have to pay (at the rate of 30%) on angel investments received at a valuation that is higher than the face value of a company’s shares (Reference: Union Budget- 2012-13) – which in several cases is almost the entire investment. Deepak Shenoy eruditely explains the mechanics of the “startup tax “and aptly observes, “All it does is to give a tax officer unlimited discretion on a tax that isn’t logical, and that will prompt those that are corrupt to demand bribes in order to approve legitimate valuations.”

Provision of tax exemptions for investments into small businesses: Tax exemptions encourage investments into small businesses and therefore help create jobs for Indians, tax revenues for the government and wealth for the country. It makes economic sense to incentivize investment into small businesses. Therefore, countries all over the world do so.For example, USA allows 100% tax exemption on capital gains income from investments in startup companies. It also allows roll-overs on investments in small businesses and permits 100% write-offs from the total taxable income on investment losses (up to $50,000). Similarly, Singapore allows deductions of upto 50% of the money invested by angels into small businesses (upto $250,000).

Unfortunately, India doesn’t provide angel investors or venture capitalists any serious incentives to spur investments into small businesses. Venture capital funds and registered angel funds are given “pass through” status, meaning that profits from investments are not taxed at the fund level but only once they are distributed to the angel investors/general partners of the VC fund. While this does avoid double-taxation, there is no real incentive to take risks and invest in businesses. Isnt’ it time India allowed angel investors and venture capitalists tax exemptions on investments into small businesses?

Incentivization of lending to MSMEs.

Expansion of the Credit Guarantee Scheme to make collateral-free loans available to small businesses: As noted in the previous article in this series, the Credit Guarantee Scheme (CGS) works along the lines of USA’s Small Business Administration’s schemes that guarantee a large portion of loans made by banks to small businesses. This encourages bank lending to MSMEs. Unfortunately, the CGS only manages to guarantee about Rs 13,784 crores i.e. 0.59% of the total credit demand of MSMEs. In comparison, the SBA guaranteed about $30 billion (~Rs 1, 80,000 crores) in loans or roughly 13 times the amount guaranteed by CGS.While it is true that the US economy is much bigger than the Indian economy, it is also true that in a high-interest rate and relatively risk-averse environment like India’s, credit is much harder to obtain and therefore, such schemes are all the more necessary.

Incentivization of skill development, training and technology upgradation: Ironically, India simultaneously faces a massive shortage of skilled workers as well as a glut of under-employed workers. At 3.8%, India’s unemployment rate looks very good. However, most of India’s workers are unskilled workers earning very low wages and doing low-value work. This is reflected in India’s low per-capital income which, according to the World Bank, stands at about $1,165 p.a. A two-pronged approach is required to address this issue:

Incentivization of the training of unskilled workers through tax credits to hiring companies: India needs skilled low-tech workers and simply does not have enough of them. The National Skill Development Council estimates that India will need about 250 million skilled workers in the manufacturing and services sectors by 2022, of which an additional 35 million skilled workers will be required in the auto industry, 33 million in the building & construction space and 26.2 million in the textiles and clothing industry.

One cannot have businesses running factories without skilled workers to operate equipment and machinery.One way to address this issue is to give hiring companies tax credits to help offset the cost of training unskilled workers. This would spur hiring and help workers and companies move up the value chain and therefore lead to higher tax revenues in the long-run.

Incentivization of soft-skills training through tax credits to “high-tech workers”: India produces roughly 5 million fresh graduates every year, of which, 50% are unfit to be hired. NASSCOM rues that only 10-25% of IT graduates produced in India are readily employable. Most of these issues stem from the poor communication skills and English language skills of graduates. It is also widely accepted in the industry that most graduating engineers simply do not have the engineering/software skills to work in the industry without a fair bit of training.

Large software companies like TCS, Infosys and Wipro spend up to 1 year on training their new hires from Indian colleges. They teach them everything ranging from email writing, time management and software design to basic programming– most of the stuff that you’d expect an engineering graduate (especially a computer engineering graduate) to know. Have you heard of Microsoft or Google doing something similar in USA or UK?

While soft-skills such as communication and time management might not sound like “skills” in the traditional sense of the word, these are exactly what our “high-tech” labour force needs. Tax-credits given to students and fresh graduates who take up soft-skills training would greatly to help them afford such training and become more employable. These workers will eventually join the pool of skilled labour, thus boosting the entrepreneurial eco-system and the economy.

The small business community has high expectations from the 2014 Budget. Let us hope that the Finance Minister sets the country on the path to prosperity by taking atleast a few steps to reform the broken eco-system around small businesses.

Given that the average 5 year inflation rate is about 9.8% p.a. , India’s tax rates can be considered to be fairly high. If you have any doubts about this, ask any of the 160 million middle class people in India. It is therefore of paramount importance that you legally minimize the amount of tax that you pay. You can do that by taking full advantage of the deductions that the taxman allows. I won’t bore you by describing the dozens of possible deductions that you can claim – this information is easy to find and is just one Google search away. Instead, I want to take you through the dilemmas that people face while considering investments specifically tailored to take advantage of these tax deductions.

Investments under Section 80(c)

Unless you have been living in a cave, you probably already know that you are allowed to deduct certain long term investments from your taxable income under Section 80(c). Tax savings from these investments depend on the maximum tax rate that you currently pay which in turn depends on your annual income. Your tax savings from these investments therefore, range from Rs 10,300 to Rs 30,900, depending on your income.

To jog your memory, here is a summary of the various investments that qualify under this section-

Fixed return investments:Employee Provident Fund (EPF) contributions, Public Provident Fund (PPF) contributions, tax saving fixed deposits with lock in periods of 5 years, National Saving Certificates (NSCs) with lock in periods of 6 yearsand life insurance policy premiums. Returns from these investments are usually fixed and known in advance. They are generally in the range of 7-9% p.a., though this varies from time to time.

Variable return investments: Special mutual funds called ELSS s with lock in periods of 3 years and ULIPs with lock in periods of 5. Returns from these investments depend largely on the performance of the stock markets and to a limited extent, bond markets.

The Dilemma:Investing causes cash flow problems. Should I invest Rs 1 lakh and part with it when my tax outgo only reduces by Rs 10,300-Rs 30,900?

When you invest Rs 1 lakh in tax saving investments, you cannot spend this money today. So, in effect – you are giving up Rs 1 lakh in spending to save between Rs 10,300 and Rs 30,900. As a middle class person who is already hard-pressed for money – this doesn’t seem to make much sense. Right?

Wrong! If your highest tax rate is 30.9%, you are getting a guaranteed return of Rs 30,900 from tax reductions. You are basically getting free money from the government and you would be stupid to give it up by not saving.

If you invest Rs 1 lakh in a fixed deposit that has a lock-in period of 5 years and pays 8.75% p.a. – you would have Rs 134,993 at the end of 5 years. Had you not invested Rs 1 lakh – you would have paid Rs 30,900 on Day 0 and have Rs 69,100 to spend. Therefore, your effective after tax return is 14.33% p.a. Would you give up an investment opportunity like that?

The following table shows after tax returns for an investment of Rs1 lakh in a tax saving fixed deposit that pays 8.75%p.a. compounded quarterly.Notice that the higher your tax slab, the higher your after tax rate of return.

Tax rate (%) (p.a.)

Amount received after 5 years(Rs)

After tax return

30.90%

134,993

14.33%

20.60%

141,113

12.19%

10.30%

147,497

10.46%

A system for pain-free wealth creation

Now suppose you had invested every single year for the last 5 years. You would be able to withdraw the first year’s investment (plus return) this year. Your maturing investments would, for the next 5 years, be able to replace whatever money you would be investing over the next 5 years. This cycle would continue forever and you would have effectively devised a system in which you would feel no cash-flow pain from making yearly investments.

What next?

There are dozens of tax saving investments in the market. Your financial advisor has probably tried to sell you quite a few of them. Your banker would have tried his/her best to do the same as well. You have a lot to choose from and are probably wondering which investment is best for you. We shall look into this in our next article.

Unless you have been living under a rock, you probably know that the big question before India in 2014 will be – who to bring to power in the General Elections to be held in May.

The options are fairly clear:

The Congress-led UPA

The leaderless Third Front

The Modi-led NDA

Neither am I a registered member of any party nor am I a “traditional voter” of any given party. I pride myself on being independent. For example, in 2009, I personally supported the Telugu Desam Party at the state level (I am from Hyderabad) and the Congress at the central level. The clinchers for me were Chandrababu Naidu’s pro-development agenda and Sonia Gandhi’s special emphasis on job-creation in rural India via the MGNREGS. In 2004, I supported the Telugu Desam Party at the state level and the NDA at the central level. The clinchers then were Naidu’s fantastic performance as the C.M of Andhra Pradesh and Vajpayee’s performance as the P.M of India.

But, this time, the answer, as far as I am concerned, is very clear. I will not give the Congress led UPA another chance after the way it has (mis)managed the country and I don’t know a whole lot of people who will. In fact, I don’t see the UPA coming back to power this time; not a chance! The battle, as far as I am concerned, is between the NDA and the Third Front.

The Third Front: A recipe for instability

The Third Fourth/ /Fifth Front is a recipe for instability and stagnation. If you thought that governance in India has hit rock bottom under the UPA II government, you will get the shock of your life if the Third Front comes to power. Can you imagine a motley of regional parties coming together with nothing in common between them? I am no political pundit but perhaps some expert could enlighten me about what the Samajwadi Party and the Trinamool Congress have in common? What about the Biju Janata Dal and the Communist Party of India? Do they agree on issues pertaining to the economy, foreign policy and defense? Do they agree on anything at all?

For example, the Samajwadi Party has openly taken a stand against English. Does the Doon School educated Navin Patnaik agree with that? The Trinamool Congress withdrew support to the UPA government on the issue of FDI in retail. Does J.Jayalalithaa agree with that? The S.P is against reservations in government job-promotions for SCs and STs. Will the BSP, which draws most of its support from SCs and STs agree to a reservation policy that excludes SCs and STs? How can a political formation whose constituents have no common agenda, let alone a shared vision for the country govern?

As Mayes once said, “Indecision is a virus that can run through an army and destroy its will to win or even survive.” If the Third Front comes to power, indecision will remain the norm in India. Our leaders will endlessly argue, discuss, debate and dissertate over commas, full-stops and semi-colons without taking any decisions or implementing any new policies. They will not be able to take a single decision mainly because they won’t be able to agree on anything. The Congress, without whose “outside support”, they won’t be able to remain in power, will, in all probability, end up withdrawing support to the third front every now and then just as they did with the United Front governments in the late 1990s.

To give you an idea of the scale of chaos that we will see, let me ask you a simple question- who will be the Prime Minister of India if the third front comes to power? If your answer is, “no idea”, then let me ask you something that is theoretically much simpler to answer- “Which parties are going to be part of this third front?” You could possibly answer that with- “Burn me twice if I know”!

Therefore, while I admire the squeaky clean Navin Patnaik, adore the decisive J.Jayalalithaa and respect the down-to-earth Mamata Banerjee, I cannot possibly vote for the Third Front.

What about Modi?

The last and in my opinion, the best option is the Narendra Modi led- NDA. Despite whatever critics say, he is the only leader in the fray who has a proven track record with respect to development and good governance. When he could script the Gujarat’s growth story, I can’t see why he cannot revive India’s faltering growth story. When he could bring good governance and transparency to Gujarat, why can’t he fix India’s corruption-ridden, torpid administration? When he could catalyze tremendous industrial and agricultural growth in one of India’s most arid states, why can’t he usher in a new era of all round development in India? He certainly has a vision for India and a proven track record to back him up.

Therefore, I strongly feel that he deserves a chance to prove himself as the Prime Minister of India.

Why support Modi?

A lot of people support Modi for various reasons. While I do not agree with some of reasons that are often cited for supporting him, I agree with T.S Eliot when he wrote:

“Now is my way clear, now is the meaning plain:Temptation shall not come in this kind again.The last temptation is the greatest treason:To do the right deed for the wrong reason.”

I believe that the right reason for supporting Modi is that he is the best hope that India has for the future. Rhetoric aside, he has brought good governance to the citizens of Gujarat by instituting transparent processes, empowering the bureaucracy, pushing through massive computerization and above all – adopting of an outcome-based approach to administration where importance is given to results rather than budgetary allocations. The results are for everyone to see.

But, what about 2002?

Despite whatever the so-called bleeding heart liberals say about 2002, a Supreme Court appointed & monitored SIT headed by an ex-CBI chief gave a clean chit to Modi as did the super-cop K.P.S Gill – the former D.G.P of Punjab who is credited with rooting out terrorism from Punjab. When the SIT appointed and supervised by the highest court appointed SIT has exonerated him, I don’t see what else there is left to say on this subject. [References: CNN IBN, Indian Express]

But, Modi is dictatorial and an autocrat. Isn’t he?

Some critics say that Modi is dictatorial and a “one-man show”. Even if that were true, wouldn’t that be better than the eons of discussion, debate, deliberation and disputation, all without any decisions or progress to show for it? Isn’t that (debates without action) exactly what we have been seeing over the last five years? Wouldn’t it be nice to see someone taking decisions for a change? Wouldn’t it be nice to hold one person accountable for the overall development of the country?

Besides, how would it have been possible for one man with a one head and two hands to centralize all power, emasculate all other politicians & bureaucrats, take every single decision, kill all dissent and yet produce these kinds of results? If he could do all that, he would be Superman; wouldn’t he? The simpler explanation is that he is a leader who is decisive and gets work done by his team of bureaucrats and ministers.

But, the Gujarat growth story is just media hype. Isn’t it?

Abraham Lincoln once said:

“You can fool some people all the time,all people sometimes,but you can’t fool all the people all the time”.

If the Gujarat growth story were hype, Modi could not have won 3 consecutive elections, enjoy this kind of popularity across the nation, have the firm backing of the industry and even win praise from people of the caliber of Dr Abdul Kalam and Anna Hazare. [References: Outlook, MSN] Besides, how can Central government data lie? How can so many national and international institutions back the Gujarat growth story in some form or the other? The World Bank, the Planning Commission and for heaven’s sake, the Rajiv Gandhi Foundation headed by Mrs. Sonia Gandhi have all, at some point of time or the other, praised parts of the Gujarat growth story. [References: Economic Times, Times of India, World Bank] Is that all media creation too?

So, what is the Gujarat growth story all about?

In essence, the Gujarat growth story is about inclusive growth that has its foundations on Modi’s vision, quick decision making, transparency and innovative development initiatives. The three key pillars of the Gujarat model are – roads, electricity and water-supply. Here are what I consider the top 5 achievements of the Modi administration:

Gujarat, under Narendra Modi, has been widely praised for its transparent and largely corruption-free administration. For example, the U.S Congress’s Report titled “India: Domestic Issues, Strategic Dynamics, and U.S. Relations observed, “ Chief Minister Narendra Modi has streamlined economic processes, removing red tape and curtailing corruption in ways that have made the state a key driver of national economic growth.”. Economists have placed Gujarat among the least corrupt states in India. [Reference: Corruption in India: the DNA and the RNA]. In fact, the Rajiv Gandhi Foundation too found corruption in Gujarat to be “relatively low”. How has he been able to do this?He took the following steps to promote good governance: [Reference: Economic Times]

Empowered his bureaucrats: Modi has been able to do this, in part, by empowering his bureaucrats to take decisions. An Albright Stonebridge Group (headed by former U.S Secretary of State Madeline Albright) report points out how Modi has virtually done away with the process of frequent transfers of bureaucrats, thus giving the administration the stability needed to provide good governance.

Introduced e-governance and digitized most government services: The Modi administration made heavy use of technology to reduce corruption. His administration was able to digitize a large part of the procurement process, thus allowing people and companies to submit bids online, thereby bringing transparency to government contracts. Every village in Gujarat has internet connectivity and is part of the Gujarat State Wide Area Network (GSWAN).All basic services such as death certificates, birth certificates, income certificates, applications for government schemes and tax payments are available at e-Panchayats. With so much computerization, the scope for giving or receiving bribes has come down drastically![Reference: Elets Online]

Promoted inter-departmental co-ordination and transparency: Modi instituted a practice where all his top officials from various departments met regularly in “Chintan Shivirs” to present the progress made in their departments to him and to the other department heads. This gave all administrators a holistic understanding of the issues that the overall state was dealing with. It also promoted a healthy sense of competition among bureaucrats-thus leading to higher efficiency and faster implementation of key initiatives.

2) Sweeping reforms in the power sector:

Electricity is as basic to a country’s economy as food is to a household. Can you imagine living for just one day without electricity? Is it not a shame that India, which calls itself a “growing world power” (no pun intended), cannot supply electricity (power) to its people, especially in summer? “Power-cuts” are still a routine occurrence all over India. The industry and the “aam-admi” alike have been suffering from roiling power-cuts that have become the norm in India. [Reference: FICCI]. The overall country faced a power generation shortfall of 9% of demand between 2007 and 2012.

Amidst all this gloom, there is a bright spot (pun intended this time) -If you were living in Gujarat, you would have had 24-hours power supply around the year! Modi transformed Gujarat into a power-surplus state! [Reference: Wall Street Journal]. While power plants in the rest of India struggled to secure coal and gas for power generation, Gujarat produced 14,000 MW of electricity – surplus of 2,000 MW. [Reference: Times of India].This was not always the case. When Modi took power in 2001, the Gujarat Electricity Board was a mess. Power supply was erratic at best; power theft was rampant and the state electricity board used to bleed money. How did Modi turn the situation around? For starters, he empowered Manjula Subramaniam, a bureaucrat known for her efficiency and made her the chairperson of the GSEB (Gujarat State Electricity Board). She was instrumental in the reform story of the power sector in Gujarat. Here is what the Modi administration did:

Re-organized the Gujarat Electricity Board: The Electricity Board was split into 7 different companies – each with a different non-overlapping mandate. Efficient management and political non-interference were the keys to the turnaround of the electricity board. The Electricity Board is now profitable and supplies power round-the-clock!

Separated agricultural, domestic and industrial electricity feeders: Under the Jyoti Gram Yojana, electricity feeder lines for agricultural use were separated from the feeder lines catering to residential and industrial uses. This allowed the electricity companies to better cater to each of these segments, balance load and measure the exact amount of electricity used for agriculture, thus minimizing the abuse of the differential pricing mechanism. It also allowed the board to supply electricity to domestic users for 24 hours a day while providing high quality (voltage) supply to the agricultural sector for 8-10 hours a day. [Reference: LiveMint] The Jyoti Gram scheme was endorsed by the Planning Commission, which stated, “The programme of feeder separation has to be carried through across the country. Gujarat has achieved very good results by combining feeder separation with an extensive watershed programme for groundwater recharge.”

Implemented large-scale rural electrification: All villages in Gujarat have access to electricity. In fact, Gujarat became the first state in India to achieve 100% rural electrification.[Reference: Economic Times] This was achieved via the” Jyoti Gram” scheme which was eventually adopted as a flagship scheme for the 12th Year Plan.

Took effective steps to curtain power theft: Power thefts ranged from 20% (urban) and 70% (rural). Once Modi’s administration realized this, they passed a law to curb power thefts, setup special police stations to clamp down on power thefts and started disconnecting the power connections of those with large unpaid dues. [Reference: Business Today] Imagine the amount of political will needed to accomplish this. If you were the Chief Minister of a state, would you have been able to take on powerful lobbies of industrialists-some of whom could possibly have supported your party? Could you imagine angering powerful people who were blatantly stealing electricity for their homes or industries and risk losing their votes in the next election? Yet, Modi did all of that and transformed the power sector into what it is today.

Instituted mechanisms to minimize transmission losses: Gujarat’s Transmission and Distribution losses came down from 35.27% in 2001 to a mere 19% today. This is in stark contrast to the national average of 27%. [Reference: Hindu Businessline and World Resources Institute]. This was made possible by a combination of investment in infrastructure, separation of feeder lines, strict monitoring of ground level data and the administrative will to ensure that T&D losses came down.

3) Agricultural growth story: Perhaps the best known achievement of Gujarat under Narendra Modi was in the agricultural sector. The Gujarat agricultural story has won praise from ASSOCHAM, from Anna Hazare and from Dr. Abdul Kalam who once remarked that all states should follow Gujarat’s example in the agricultural sector. [Reference: Business Today].

Before one goes into the statistics, it is important to remember that the Rann of Kutch, the largest salt-desert in the world, is in Gujarat. I don’t know about what you think, but I don’t exactly expect a state with such a large desert to produce crops and top the country in agricultural growth. Here is what the statistics say- The average agricultural growth in the decade of 2001-2011 was 11.2% p.a., up drastically from 3.3% p.a. in the 1990s. [Reference: Planning Commission]. Compare this to India’s agricultural growth during the 10th Five Year Plan (2002-2007) -> 2.13% p.a. and in the 11thFive Year Plan (2007-2012) -> 3.44%. [Reference: Planning Commission].

It is a no-brainer that the lifeblood of agriculture is water. Gujarat isn’t exactly Cherrapunji and consists mainly of arid and semi-arid regions. [Reference: Department of Agriculture, Govt. of India]. Some economists have classified 70% of the area of Gujarat under the arid and semi-arid categories. How did Gujarat manage to achieve such growth rates despite having barren, arid land and the biggest salt-desert in the world? Here is what the administration did to achieve this:

Implementation micro-irrigation projects on a gargantuan scale– After Modi took over as the Chief Minister of Gujarat, his administration focused on building micro-irrigation infrastructure in Gujarat.

Drip irrigation: Inspired by the best-practices used in Israel, the Modi administration took steps to ensure the proliferation of drip-irrigation in Gujarat. It fast-tracked subsidies and loans for the purchase of drip-irrigation equipment by farmers. The farmers would pay 5% of the cost of the equipment while the state government subsidized it by 50%. Banks loans were arranged by the state for the remaining 45%. With such a pro-active government, farmers were quick to adopt drip irrigation. The area irrigated by drip-irrigation systems grew from 10,000 ha to 5, 00,000 ha over the last 10 years! [Reference: India Today]

Implemented top-tier rural electrification – We have discussed the “Jyoti Gram” Yojana for rural electrification at length. Therefore, I shall not go into it again. It will suffice to say that Gujarat’s agricultural growth story would not have been possible without high-quality power supply to its tubewells and pumpsets- something that the “Jyoti Gram” scheme helped enable.[Reference: Business Standard]

Facilitated diversification into high value and non-food crops– The availability of electricity and water enabled the switch to high-value crops like mango, banana, wheat, fennel and non-food crops like cotton. Farmers were encouraged to adopt BT cotton that produced higher yields per acre than traditional cotton. [Reference: India Today]

Championed the adoption of new technology and best-practices in agriculture

Soil-health cards– Gujarat was the first state to issue soil-health cards to its farmers. These Soil Health Cards (SHCs) were created after the scientific testing of soil for properties such as mineral composition, water-retaining capacity and productivity. The cards are custom-tailored to each farmer’s piece of land and contain information such as the right crops suited to the farmers’ soil, the right amounts of fertilizer, pesticide and water to be used on that soil. Thus, they helped farmers boost the productivity of their land.[Reference:Information Week]

Alternate methods of farming and marketing-New methods of farming e.g. contract farming were encouraged. Corporates started getting into agriculture. Corporates were encouraged to start sourcing from farmers directly. This practice is something that large retailers such as Reliance Fresh, Food Bazaar and Spencer follow across Gujarat.[Reference: Economist Swaminathyan Iyer of Economic Times and Cato Institute]

Krishi mahotsavs– Annual farmers’ events known as “Krishi mahotsavs” allowed farmers to interact directly with government officials and agricultural experts. These events helped in the proliferation of the best practices in agriculture among the farmer community. They also helped government officials get a better understanding of the problems that farmers face on-the-ground (no pun intended). [Reference: Indian Express]

Emphasis on animal husbandry – The state government actively promoted animal husbandry. Intensive animal vaccination drives were conducted at krishi mahotsavs. Animal health camps continue to be organized across the state where animals have health checkups and even dental checkups.

4) Built up massive amounts of basic infrastructure– If there is one area where India is light years away from where it should be, it is infrastructure development. Whether it is roads, airports, ports or even internet connectivity, India lags far behind any developed country and now even developing countries. Gujarat is different, though. Here is why:

Roads-Gujarat has one of the best road-networks in India, with a road network of 74,000km. 98.83% of Gujarat’s villages are connected by “pucca” all-weather roads. Yes, it is true that most of Gujarat’s villages were connected by roads even before Modi took office. So, what did Modi do? Well, he did a great job- that’s what he did. Here is why:

Improved the quality of roads drastically: Gujarat now has highways that beat international standards. A World Bank Report stated that the International Roughness Index (IRI), a measure of the quality of roads, of highways in Gujarat was better than internationally desirable levels. It also stated that the IRI of Gujarat’s highways ranged from 6 metres per k.m. to 20 metres per k.m in the year 2000 and improved to less than 4 metres per k.m. in 2007. [Reference: World Bank]

Constructed new roads and highways on a huge scale: Not only has Gujarat spent massively on the construction of new roads and highways, but it has also ended up constructing them – a huge achievement in a country where roads and bridges often exist on paper but not in real-life! For example, as part of the Pragathi Path Yojana, 3,710 km of 2 lane and 4 lane highways were constructed. [Reference: Ernst & Young]

Took up the widening and upgradation of existing roads: Widening and upgradation of roads not only cut travel times but also give a huge boost to agriculture and industry as they enabled goods and agricultural produce to reach markets, ports and godowns faster. The Gujarat government laid special emphasis on upgrading existing roads to cut travel time between villages and markets, between factories and ports and between towns and cities. For example, urban roads measuring 551 km were modernized and upgraded under the Vikas Path Yojana, rural roads measuring 3,281 km were upgraded under the Kisan Path Yojana.[Reference: Ernst & Young] After the Bhuj earthquake struck Gujarat, the government promptly reconstructed roads measuring 4,095 km.

Ports– The Modi government put the Public-Private-Partnership model for port development on steroids by cutting red-tape. This model allowed private players to build greenfield ports under the BOOT (Build Own Operate Transfer) framework. Private players were given the power to determine pricing and tariffs at ports and even allowed complete operational freedom. This spurred massive private investment into the port sector. The Mundra port, the Dahej port, the Hazira port and the Pipavav port are all private ports build under this model. They have a combined capacity of over 100 million tonnes p.a. [Reference: Business Standard].The development of ports gave a huge boost to industry as it promoted easy exports and imports. The result – Gujarat’s port led development model is being studied for emulation by Odisha, Karnataka and even Kerala. The involvement of the private sector has improved the cargo-handling capability of the ports. Gujarat’s ports now handle 72% of the entire cargo handled by Indian ports. Port capacity has more than doubled in Gujarat from 135 million tonnes in 2001 to 284 million tonnes in 2011.

5) Huge fillip to industry in general and manufacturing in particular: You probably already know that Tata Motors, General Motors, Ford and Maruti Suzuki have all setup large manufacturing plants in Gujarat. You probably also know that the actual factories are only the tip of the iceberg, that core-industrial factories spur the growth of ancillary industries (e.g. spare parts, components etc.), create large amounts of employment and raise land prices around the area. But, you probably didn’t know why Gujarat was chosen and to what extent Modi deserves credit for it. Here is what he and his administration did:

Modi personally wooed industrialists to setup plants in Gujarat: One well known incident occurred in 2008, when Tata Motors was virtually chased out of West Bengal by Mamata Banerjee’s agitation against the Tata Singur plant. When Ratan Tata announced in a press conference that the Tatas were pulling out of West Bengal, Modi famously sent an sms to Ratan Tata saying, “Welcome to Gujarat”. Tata Motors responded promptly by setting up the Tata Nano plant in Sanand after investing Rs 2,000 crores. [Reference: NDTV]The plant was up and running in about 2 years!

He put in place equitable land acquisition policies and facilitated super-fast clearances: Gujarat’s clear land-acquisition policy (formulated by the Modi administration) ensured that acquiring land for factories was easy and beneficial to both farmers as well as to industrialists. The policy dictated that farmers would not only be paid market rates for their land but that they would be paid an additional 10% of the price paid by the acquirer and allotted 1% of the total land acquired for (their) commercial use. [Reference: Business Standard] Farmers who gave up all of their land were also paid an additional Rs 75,000 as compensation. To top all this off, one person from each affected family was provided free industrial training and almost-guaranteed employment at the factory that acquired land. No wonder farmers in Gujarat celebrate instead of agitating whenever a new industrial project is announced in their area.The Modi administration also took a pro-active role in facilitating all the required clearances for the setting up of all factories and plants. [Reference: The Hindu]The administration also gave special concessions to industries to make Gujarat attractive to them.

Gujarat’s reliable electricity and water supply attracted industries: Factories cannot run without continuous and stable supply of electricity and water. Gujarat’s excellent electricity situation is well known, as is the fact that water supply is plentiful due to the irrigation projects undertaken.[Reference: The Hindu]

What next?

The upcoming General Elections of 2014 are crucial to the future of India. The results of these elections will decide whether India moves in the direction of growth or falls into an abyss. This time, a vote for Modi would be a vote for progress; a vote for the third front would be a vote for instability and indecision. So, as India decides the answer to the zillion dollar question of who will lead it post 2014, I will invoke the immortal knight of Indiana Jones lore who would have said,

“India- choose wisely,for while the true grail will bring you life,the false grail will take it from you.”

(This is the first of a two part series on entrepreneurship in India and the challenges & opportunities in this space)

Entrepreneurs are heroes, period. Not only do they create jobs, generate wealth and produce goods or services that society values, but they also sustain economies and act as agents of change in the global economy. For the purpose of this article, I will refer to their businesses as MSMEs (Micro, small and medium enterprises) and define them as businesses that employ between 1 and 500 people.

In developed economies, MSMEs create most of the jobs and sustain entire economies. An OECD report estimates that 60-70% of all jobs in developed economies are created by MSMEs. In USA, there are over 27.9 million MSMEs[1] that contributed roughly to half of the non-farm GDP[2]. That effectively means that these tiny businesses having between 1 and 500 employees together generate as much value to the economy as all the major corporations and governments in USA put together.

MSMEs in India are underperforming hugely

Known for its entrepreneurial spirit, India has produced some great entrepreneurs such Laxmi Mittal, Dhirubhai Ambani and Jamsetji Tata. However, if you look at the data closely, you will find that that Indian MSMEs, as a group, are severely underperforming heir global peers.

For example, MSMEs employ 40% of India’s workforce and yet generate only 17% of its GDP. In contrast, China’s small businesses employ 85% of its workforce and generate 60% of its GDP. The comparison with USA and UK is almost as stark.

While the number of MSMEs in India looks impressive at first glance, standing at 48.8 million, the picture in reality is not as rosy. Most of these 48.8 million businesses are not formally registered and therefore, technically speaking, aren’t really MSMEs. When businesses aren’t registered and legally recognized, they miss out on opportunities to access credit, technology and growth opportunities.

Why is this happening? : Issues

There are a host of issues that plague Indian MSMEs ranging from the poor availability of infrastructure (roads, electricity) to the lack of adequate skilled manpower. However, two issues stand out as the biggest roadblocks to the growth of MSMEs in India.

Key Issue 1: Stifling legal and regulatory environment

Entrepreneurship is tough anywhere in the world. But in India, it is truly daunting. The regulations governing small businesses in India are excessive, restrictive and suffocating. India is rated as the worst country in Asia for entrepreneurs[4]. India stands at 179th in the world in terms of ease of starting a business and 134th in terms of ease of doing business[5], behind even Pakistan and Rwanda.

Entrepreneurs in India complain that they have to jump through hoops to start their companies. Registering a company usually takes about a month and involves significant expenditure including “incidental expenses” at various government offices.

The concept of single window clearances just does not seem to exist as several government bodies ranging from the Ministry of Corporate Affairs, the Labour Department, the Income Tax Department and the Commercial Taxes Department come into the picture. Of course, depending on the nature of the business, several other departments such as the Health Department, Fire Department or the Police Department need to be approached for licenses or “no-objection certificates” even before making a single dollar in sales.

The following table shows how India compares to South Asia as well as to the developed countries (OECD) on key indicators pertaining to the ease of starting businesses.

Due, in large part to the burden of complying with the myriad regulations, most of India’s small businesses remain unregistered and in the process, limit their growth and potential.

Key Issue 2: Lack of adequate capital

Capital (credit) is the lifeblood of business. Indian businesses face a massive shortage of capital and struggle to get bank loans or funding. High interest rates and the need for collateral for bank loans, limit the access that small businesses have to much needed capital.

The Planning Commission of India estimates that in FY 2014, there exists a credit gap between demand and supply of Rs 15, 66, 089 crores (MSMEs). This figure does not take into account the fact that a large section of MSMEs cannot afford to give collateral for loans.

The concept of collateral-free loans for MSMEs, guaranteed by a government fund is slowly picking up in India. The Government of India launched the Credit Guarantee Scheme (CGS) for MSMEs in the year 2000 that attempts to stimulate collateral-free credit to MSMEs by guaranteeing over 75% of the loan amount lent by banks to MSMEs.

However, the progress is slow at best. For example, in FY 2012, Rs 13,784 crores worth of loans to MSMEs were guaranteed under the CGS scheme, a mere 0.59% of the total credit demand of Rs 23,08,384 crore in that year[6].

The road ahead: A massive challenge or a gargantuan opportunity?

The eco-system around MSMEs represents both a massive challenge as well as a gargantuan opportunity for the country. Success with repairing this eco-system can pay rich dividends in the form of accelerated job creation, wealth generation and economic prosperity. Failure to address this problem could mean a sluggish economy and moribund growth for an extended period of time.

In the next article in this series, we will look at some of the steps that can be taken by the government to unleash entrepreneurship in India and truly put it on the path to long-term growth.

“The greatness of a nation and its moral progress can be judged by the way its animals are treated.” – Mahatma Gandhi

The story of Bruno*

Bruno was a beautiful 2 year old Labrador retriever dog. His human family consists of four people who loved him very much, a software engineer couple and their two young daughters- sixteen year old Isha (name changed) and ten year old Ela (name changed) who lived in a gated community in Hyderabad. One day, Ela came home to Bruno lying by their doorstep in a pool of blood, a large part of his tail missing and two of his paws badly crushed. In a state of total panic, she shrieked and started crying. Thankfully, her neighbors rushed to the spot and took Bruno to the hospital. After an hour-long surgery and four days in the hospital, Bruno survived but was never able to walk normally again. Bruno was never the same again, and how could he be?

It turned out that a group of three depraved, heartless men aged between 25 and 30, who lived in the same gated community sadistically took turns running Bruno over with a brand new scooter that one of them bought recently. It was their perverted idea of fun. When I first heard of this story, my reactions were visceral. My blood boiled and my heart bayed for their throats. However, what followed was even more heart-breaking.

We Indians pride ourselves on our history. India, after all, is the land of the Buddha – the enlightened one who preached ahimsa (non-violence) above all else. India is the land of Mahatma Gandhi- the warrior who brought the British Empire to its knees without shedding a single drop of enemy blood. Surely, in India, the tormentors of Bruno would be punished, and punished in accordance to the severity of their crime. When Bruno’s family approached the police and went to court, the three criminals plead guilty to animal cruelty. What happened next was a travesty and a blot on the conscience of any civilized nation. The judge, bound by the toothless Prevention of Cruelty to Animals Act (1960), levied the maximum punishment on the three men – a fine of all of Rs 50! (Chapter III, Clause 11 (o), Prevention of Cruelty to Animals Act of 1960)

Animal Cruelty in India

Animal cruelty is fairly common in the country. Animal cruelty can broadly be classified into two types:

1) Wanton, sadistic cruelty: This type of cruelty is perpetrated by psychopathic and sadistic people without any apparent reason. It could range from relatively benign incidents such as children throwing stones at dogs or cows to horrifying instances of brutality such as the mutilation of pets and starvation of house animals. Reports indicate that instances of wanton cruelty are on the rise. With the penalty for animal cruelty being a paltry Rs 50, there is no deterrent to such mindless behaviour.

a) Over-stuffling cattle into trucks: It is common in India to see 15 cows being forced into a truck that can only hold 7-8 while they are transported hundreds or even thousands of kilometres by road. Cows are often beaten, their legs broken and made to stand on top of each other for days together without food or water – all to save they cruel owners a little bit of money. When caught, the truck drivers plead guilty to animal cruelty and pay the paltry Rs 50 fine that is mandated under the PCA Act. Says Alokparna Sengupta, a prominent animal welfare activist based in Hyderabad, “The treatment of cattle during the transportation process brings tears to my eyes every time I think about it. The worst part is that even when the truck-drivers are caught ill-treating cattle, we cannot have the cattle seized under existing laws. The cattle are given right back to the truck drivers after they pay the fine.”

An estimated 150 million cattle are slaughtered every year in India (Source: The Independent) and beef of about 1.8 million tonnes was exported in 2013 (Source: Reuters) . Imagine how cruelly most of them are treated for days together while they are transported to the slaughterhouses.

b) Rearing of poultry in tiny battery cages: Battery cages are cages designed in such a way that hundreds of egg-laying hens are stuffed into a series of cages in such that each hen has less space than one A4 size sheet of paper to live its entire life in. Hens in battery cages cannot move and undergo untold suffering throughout their lives. An estimated 200 million hens i.e. 70% of all of India’s hens live in battery cages (Source: WorldPoultry). Technically, battery cages violate existing animal cruelty laws. The Animal Welfare Board of India even issued advisory asking states not to allow the use of new battery cages and to discontinue the use of existing ones after 2017. However, it is unclear whether this advisory is binding and whether it will be enforced.

What the Supreme Court says

As part of a landmark judgment this May in the case of Civil Appeal No. 5387 OF 2014 (SLP No.11686 of 2007), the Supreme Court of India re-affirmed the basic rights of animals and said that it expects the Parliament to amend the PCA act to “provide an effective deterrent to achieve the object and purpose of the Act”. It further sought “adequate penalties and punishments” for violations of the Act. What is most significant about the judgment is that it sought the elevation of the rights of animal to that of constitutional rights to “protect their dignity and honour”. It further directed the government to take disciplinary action against erring officials.

The implications of this judgment are profound. It effectively places the responsibility of amending the existing laws on animal welfare on the Parliament and of effectively enforcing them on the government. Animals and animal rights activists across the country will forever be indebted to Justice K.S. Radhakrishnan for such a visionary judgment.

Top policy changes sought

Animal rights activists seem to broadly agree that the top 3 policy changes that need to be implemented immediately are:

Increasing the penalty for animal cruelty from the existing Rs 50 to a more substantial sum, say Rs 50,000 depending on the severity of the offense.

The amendment of legislation to make serious animal cruelty offenses cognizable, to empower enforcement authorities to seize animals that are being treated cruelly (e.g. cattle)and to arrest offenders.

Increasing the manpower and funding available to the government bodies implementing animal welfare laws.

The way forward

The present laws against animal cruelty (Prevention of Cruelty to Animals Act, 1960) are outdated, ineffective and poorly enforced. We need a complete overhaul of the legislation in line with the directions and observations of the Supreme Court.

Says Jayasimha Nuggehalli, Managing Director of Humane Society International (India),“The reform of the existing laws is a great first step towards the welfare of animals, but they should also be accompanied by better funding and more manpower for government bodies that work to implement these laws. We have high hopes on Modiji that he will help overhaul the system to help protect the interests of animals.”

Experts feel that it is equally important to create awareness among the general public about the issues concerning animal welfare and for the general public to be responsive to the animals around them. Says Alokparna, “Animals need the people of India to step up and speak out for them. Whenever someone sees an animal being abused, they should report it. If they cannot report it, they should call a local animal welfare NGO and inform them. This will go a long way in making India cruelty-free.”

*The story of Bruno is based on real life events. Image Credits – Wikipedia, All-Puppies.com, The Hindu, Farm-Sanctuary, VeganRabbit and others.

During the run up to the 2014 General Elections, India witnessed an unprecedented amount of debate between the political left and the right about the ‘idea of India’ and about the place that secularism and pluralism have in India. This debate took place between politicians who used public rallies and speeches as their media of expression, between panelists on television shows, between intellectuals through newspaper editorials and between friends and family members across dinner tables. But the most intense and acrimonious debates were reserved for social media such as Twitter and Facebook, which became fierce battlegrounds over the last six months or so.

The argument that was repeatedly put forth, ad nauseam, by the ‘liberal left’ was that the rise of the “Hindu right” would destroy the secular fabric of India and would ensure the complete and total ‘Hindu-ization’ of India through the systematic persecution of the minorities and the imposition of Hindu ideals on secular India. Much water has flown under the bridge since then.

Let us first understand a few basic facts about Hinduism before we attempt to answer the key questions here –“Is India going to be Hindu-ized? If so, do we have anything to worry about?”

Fact 1: Hinduism is not a religion

Though it is said to be the world’s oldest religion, Hindusim is not really a religion. It is a way of life, originally known as ‘Sanatana Dharma’- a set of beliefs and practices, some of which are over 5,000 years old.

As opposed to most religions that are highly centralized and structured, there is no central organization (e.g. The Catholic Church in the case of traditional Christianity) around which Hinduism runs, no one holy book (e.g. The Koran in the case of Islam or the Bible in the case of Christianity) that lays down all the tenets of the religion and no single founder of the religion (e.g. The Buddha in the case of Buddhism or Jesus Christ in the case of Christianity) who is highly venerated.

There are several schools of thought within Hinduism, not all of which espouse the concept of god. For example, the Charvaka school of thought is atheistic in nature and preaches materialism and philosophical indifference. The Advaita school of thought preaches that the universe is a manifestation of the supreme consciousness and that these two are one and the same (non-dualism).

Fact 2: There is no such thing as ‘conversion’ to Hinduism

Unlike in Abrahamic religions such as Islam or Christianity (with the exception of Judaism), the concept of conversion does not exist in Hinduism. Therefore, like in Judaism, you had to be born a Hindu to be Hindu. Hindu scriptures do not encourage proselytization or even recognize the concept of ‘conversion’ to Hinduism.

Some spiritual masters such as Swami Dayanand Saraswati have, since the 19th century, encouraged those Hindus who converted to other religions by coercion or choice to return to Hinduism. It has, since then, been possible for non-Hindus to follow the practices of Hinduism voluntarily.

When was the last time that you heard of a rampaging Hindu army forcing their vanquished enemies to embrace Hinduism or of a Hindu temple offering money to poor people to convert to Hinduism?

Fact 3: Hindu scriptures do not claim that Hinduism is superior to other religions

Unlike in the case of some religions, the Hindu scriptures do not discriminate between people following different religions. Neither do they claim that Hinduism is superior to other religions.

In fact, the following verse from the Rig Veda sums up Hindu outlook towards other religions, “Ekam sat vipra bahuda vadanti” or “Truth is one, sages call it by many names”.

Fact 4: Hinduism champions tolerance and pluralism

One of the central tenets of Vedic philosophy stems from the following phrase in the Mahopanishad of the Atharvana Veda that reads, “Vasudhaiva kutumbakam” or “The world is one family”. Vedic scholars consider not only humans but all life forms- including animals and plants as part of one large family.

Fact 5: History shows that Hindu culture is inherently tolerant and pluralistic

Ancient Indian history is proof that Hindus society is inherently tolerant. Perhaps this stems from the emphasis that the Hindu scriptures place on non-violence. The following phrase from the Bhagvad Gita sums up Hindu outlook towards violence of any form – “Ahimsa paramo dharmaha” which means, “Non-violence is the most important of duties.”

Several examples from Indian history show that the Hindus treated followers of other religions with respect and dignity, living side by side with them even when they sometimes came as refugees.

a) The Parsi settlement in India

After the Muslim conquest of Iran and the fall of the Sasanian Empire, the Parsi ancestors (Zorastrians) fled to India for the sake of religious freedom. They came to India and were welcomed by the local ruler and even given a large plot of land to build a place of worship- a fire temple. Their community lived side-by-side with the Hindu population, enjoying the same status as the Hindu-majority. Since they settled down in India, the Parsis have been valued members of Indian society. To this day, some of the biggest business houses in India such as the Tata Group of Companies and the Wadia Group of Companies (Bombay Dyeing etc.) are owned by Parsis.

b) Buddhism in India

Buddhism, as a religion, started in India, a Hindu country. The Buddha, the founder of Buddhism, was born a Hindu. Buddhism spread in India and as a result, Hindus and Buddhists peacefully co-existed for centuries. Wars between Buddhist kings and Hindu kings were rare. When Buddhism eventually died out in India, it was due to the influence of fundamentalist Muslim emperors (Source: Karmapa Lama’s office)

Were there instances of violence by Hindus?

Of course there are instances of Hindu kings destroying places of worship of other religions and even persecuting people following other religions. However, they are few and far between.

The most important distinction on this point between Hinduism and some other religions is that violence against people of other religions and forcible conversions have absolutely no sanction from Hindu scriptures. There is no ‘moral obligation’ on a Hindu citizen or for that matter a Hindu king to spread Hinduism or proselytize it. If a Hindu king ever forced the spread of Hinduism, it was for extending his sphere of influence rather than for Hinduism as a religion. In any case, such cases were extremely rare.

Conclusion

I believe that there is no need for anyone to worry about the ‘Hindu-ization’ of India since history shows that it is not in Hindu culture to force people to follow Hindu customs or traditions or worship Hindu gods. It is in the DNA of Hinduism to not just tolerate, but embrace diversity and I don’t think that this is about to change anytime soon.

This article of mine was published on Pluggd.in, one of India’s top startup news sources on July 12th, 2013 over here.

[Editorial notes: Investopresto shutdown recently and while that has resulted in deep analysis ofpersonal finance space in India, founder, Ashwini Anand shares the learnings, a hingsight analysis. In a very UnPluggd fashion. Kudos to Ashwini for being brave and open about it.]

People say that hindsight is 20/20 (vision, not cricket). And they are right. In hindsight, it seems as if we had made several mistakes. But, which startup doesn’t? Markets conditions are constantly changing, investor risk appetites are constantly changing and above all, the amount of information that an entrepreneur has, to base his decisions on, is very limited. The final triggers for our shut-down were the lack of interest of follow-on VCs in our venture and our inability to raise adequate follow on funding.

Could we have done something differently?

As I said earlier, hindsight is 20/20. Had I known 2 years ago, what I now know, I would have done the following things differently.

We would have stuck to the Singapore/US markets. This would have given us access to customers who generate a whole lot more revenue than the ones in India. It would have allowed Singapore/US based funds to invest in us:

The Indian financial markets are very immature compared to the ones in developed economies like USA. Retail investor participation in the markets is very low and the lack of growth in this segment does not augur well for the long term future of the equity markets. This will probably change, going forward, but in hindsight, we entered this segment way too early. The best time to enter a market is when you don’t have to struggle to find a customer.

There are a lot of such sectors in India – insurance being one such sector. Over 50 million new insurance policies are sold every year. Compare this to the number of new stock trading accounts opened every year – barely 1 million. Most demat accounts are inactive and bring you no money.

We would have spent a lot less time and money on technology/ product development a whole lot more on marketing and market intelligence:

In hindsight, we spent way too much money on developing the product and did not launch early. This was the single biggest factor that led to our downfall. You can read more about this in the technology section.

We would have focused on 1 segment of the market and started charging from Day 1:

In hindsight, we tried to do too many things at the same time. The logic was – ‘ 1 user can use our social network, our virtual trading application, our forums, our news feeds, manage his investment portfolio, analyze his risk exposure, do his research and also trade on our portal’. This was partially right, but it was just not the right approach for a startup which had to constantly show growth to please incoming investors. This would have been a great approach if we had more money to spend and a little more time. Realization – “If you want to do something in this sector, you have to have more staying power aka cash to keep you going.”

Fundraising

I can barely think of 3-5 investors here who even understand our domain well (personal finance/retail investing). This is a huge problem for us. Investors here seem to like safe ventures or ventures “hot” areas e.g. cloud computing, big data/analytics etc. While this is true almost everywhere in the world, it is truer in India. In fact, I remember presenting to about 40 investors at an angel-group meeting. One of them asked me a question that gave me a huge insight into the general maturity levels of some of the investors here, “I see your gross profit numbers in the presentation.

The biggest mistake I made was to have the entire code re-written on Ruby on Rails.

Gross profit isn’t really profit. You should show your net profit numbers. What are your net profit numbers?” The fact that she didn’t appreciate the fact that financial projections are just order of magnitude estimates that are more like guidelines than anything else goes to show how much she really understood about startups.

Of all possible questions – about execution risks/ about market conditions/about the skill set that the team has, she asked a question about gross profit/net profit. That said it all.

Technology

We would not have had our codebase re-written

We had a pretty solid version of our product by June 2011. The problem with the product was that I had written the bulk of the code myself and focused on “getting it to work” rather than on making it scalable and pretty. The entire code-base was written on the .NET platform, which was rather out of vogue.

Most startups were migrating to Ruby or Python and kept extolling the benefits of the move.

The biggest mistake I made was to have the entire code re-written on Ruby on Rails.Do I have anything against the platform? Absolutely not! I like the platform and even appreciate the benefits that it offers programmers. However, the move was simply not worth the investment of time and effort. We finally released in May 2012 after re-writing the code base and adding new features to the product.

Test Driven Development

We would have never adopted Test Driven Development

What about TDD? It was a complete waste of time for us. The logic was – ‘This is a financial application. Quality is of paramount importance. So, we need tests to make sure that everything works all the time.’ So, we did as the experts had suggested – we wrote tests and then wrote code after that. What was the problem? The requirements changed all time.

Ask any IT entrepreneur worth his salt and he will tell you that the details of the product change all time, almost every day. Hence, the existence of Continuous Integration (CI), Continuous Deployment (CD) etc. So, tests would keep breaking and we would keep re-writing them. This cut our speed by atleast 50%. Did the quality of the code improve? Not really! Tests can only check if your code can handle pre-defined cases. But when the requirements themselves change, your tests are useless.

We would have hired 2 top-notch developers rather than 7-8 mediocre developers.

The fact is that the quality of the developer-pool in India (that most startups have access to) leaves a LOT to be desired. Folks may not admit this openly, but they will agree in private. The cost levels are low, but so are the professionalism levels and quality levels.

Am I saying that there are no good developers in India? Of course not! But, I am saying that the developers that most startups have access to are not “up there”.

It is much better to pay 2 excellent developers 15 lakhs a year each and get work done, than to pay 5 mediocre developers 7 lakhs a year each and beat yourself up about slow progress or poor quality.

Hiring good devs is a HUGE challenge. We didn’t crack this problem well. We tried advertisements, HR consultants, agencies etc, but the only decent developers we got were through personal networks.

Regrets?

No regrets. We had the courage to take the plunge, raise close to half a million dollars, build a product that we are proud of, get over 20,000 users and to fight like hell. I would do it all over again!

A quick Wikipedia search will show you that the idea of liberalism is based on two concepts – liberty (the right of individuals to control their own actions) and equality (self-explanatory). I call myself a liberal because, like most liberals, I believe in:

A clear separation between governments and religion (Secularism)

Equality of all people before the eyes of the law, irrespective religion (Secularism)

A lady’s right to choose whether to have an abortion or not irrespective of what her family thinks (Prochoice)

That the LGBT community should have the same set of rights as the rest of us including the right to be in a legally recognized marriage (Gay rights)

A fair and reasonable amount of affirmative action to enable the underprivileged to catch up with the others, but not at the cost of quality (Mildly proaffirmative action)

The legalization of euthanasia subject to reasonable regulation (Proeuthanasia)

What is Hindutva?

Hindutva, not to be confused with Hinduism-the religion, according to the Supreme Court, is “the way of life of the Indian people and the Indian culture or ethos” and is “not to be equated with or understood as religious Hindu fundamentalism”. The same Supreme Court judgment ruled that it is a fallacy to infer that the use of the word “Hindutva” per se depicts an attitude hostile to all persons practicing any religion other than the Hindu religion.

The vilification of Hindutva by pseudo-secularists

Hindutva has, of late, been vilified by pseudo-secularists who have been branding it as the philosophy of “right wing terrorists”, as the philosophy of the “Hindu- Taliban” and other such nonsense. As a liberal, I refuse to allow people to speak baloney on my behalf. As a liberal, I see no contradiction between liberal values and Hindutva.

What is it about “Hindutva” that is un-secular or un-liberal? Why should anyone get to call a Hindutwavadi a “Hindu-Taliban”? One argument often cited by pseudo-secularists is that Hindutwavadis seek to establish a “Hindu-rashtra exclusively for Hindus (those practicing Hinduism) at the expense of Muslims/Christians and other religious minorities.”

This argument is ridiculous on so many levels. To start off with, the word “Hindu” in this context does not mean a follower of Hinduism-the religion. In fact, Veer Sarvarkar, the freedom-fighter who coined the term “Hindutva” was a rationalist and defined the term to mean “any patriotic inhabitant of Bharatvarsh (India)”. (Source: Savarkar, Vinayak Damodar: Hindutva, Bharati Sahitya Sadan, Delhi 1989 (1923)). Besides, this school of thought had its roots during the time of the British rule of India and the notion of a “Hindu rashtra” was in contrast to a nation of Indians being ruled by the British – which was what India was under British rule.

ImageCredit- IndiaOpines.com

What are the key issues championed by the Hindutvawadis?

The key issues championed by the Hindutvawadis are:

Uniform Civil Code- A uniform set of laws for all Indians irrespective of religion

Abolition of article 370- Article 370 grants a special status to Kashmir that gives it powers that other states don’t have.

Building a Ram Temple at Ayodhya- Ayodhya is believed to have been the birthplace of Lord Ram and is one of Hinduism’s most holy sites.

Is there any merit to the issues that Hindutvawadis take up?

Uniform civil code – When people claim to believe in equality of all people irrespective of religion, race, caste and gender, shouldn’t it be a no-brainer that all people of India should follow the same set of laws? Yet, India has a different set of personal laws for Hindus, Muslims and Christians. The rules and laws governing Hindu marriage, Hindu divorce, Hindu inheritance and Hindu adoption are different from the rules governing Muslim marriage, Muslim divorce, Muslim inheritance and Muslim adoption. And yet, Sikhs, Buddhists and Jains have to follow the rules governing Hindus. Does this make any sense at all? Does it make sense for the government to allow a Muslim to marry twice but to prosecute a Hindu or a Christian for doing the same? Doesn’t this put the term “equality before law” to shame? What would a liberal say?

Abolition of article 370 – Article 370 of the Indian constitution accords a special status to the state of Jammu and Kashmir. It implies that except in matters pertaining to Defense, Foreign Affairs, Finance and Communications, the Central government cannot make any laws that apply to the state of Jammu & Kashmir without the State Legislature’s concurrence. Therefore, the residents of the state of Jammu and Kashmir live under laws that are different from those applying to the rest of India. I don’t know how this sounds to you, but it sure sounds pretty ridiculous to me.

Ram temple at Ayodhya – I am not really a practicing Hindu and don’t remember going to a temple to pray in the last year or so. Yet, I believe that all religions are equal and should be accorded respect. Therefore, I find it very strange that Hindus don’t get to have a temple at Ramjanmabhoomi in Ayodhya- one of Hinduism’s most sacred sites. Whether Lord Ram was indeed born in Ayodhya or not is immaterial here since religion is about faith and belief rather than anything else. Most Hindus believe that Ayodhya is the birthplace of Lord Ram and their beliefs should be respected. What is wrong about having a place of worship at a place that is considered sacred by almost a billion people? Wouldn’t it be strange if Jerusalem did not have a Church or if Mecca did not have a mosque? So, why should Ayodhya not have a temple?

So, am I a liberal or a Hindutvawadi?

Going by my views on the above issues, I would be dubbed as a Hindutvawadi by pseudo-secularists. However, going by my views on core questions pertaining to secularism, equality, liberty, abortion, stem-cell research, immigration, separation between government & religion etc., I would be considered a liberal. So, am I a liberal Hindutvawadi? You decide for yourself.